When you buy a new car, it’s essential to have enough auto insurance to cover its value in the event it gets damaged or stolen. If your purchase is financed, lenders require you to carry full coverage anyway. However, once the vehicle gets older and your loan is paid off, you may no longer need all of that protection. While you don’t want to pay more for your premiums than necessary, you should carefully consider your situation before dropping any coverage. The following information will help you determine what’s best for your finances. 

How to Know When to Reduce Your Auto Insurance

What Is Considered Full Coverage? 

Full coverage refers to an auto insurance policy that includes a combination of liability, collision, and comprehensive coverage. The majority of states legally require drivers to purchase a minimum amount of liability insurance to cover the costs of the other party’s losses if the insured is found responsible for causing an accident. Carrying just liability means you won’t have protection against any losses incurred for your own vehicle. Collision insurance will help pay to repair or replace your car after a crash, regardless of who was at fault. Comprehensive insurance will cover damages to your vehicle resulting from natural disasters, falling objects, vandalism, theft, and animal impact. 

What to Take Into Account Before Making a Decision 

Most lenders require borrowers to have collision and comprehensive coverage to ensure their financial interest in the vehicle is protected. Thus, you won’t be able to cut back on your auto insurance if you’re still paying a loan. Next, factor in how much your car is worth. As a general rule, if your annual premiums for full coverage exceed 10% of the vehicle’s value, it may make more financial sense to get rid of collision and comprehensive coverage. Keep in mind that without full coverage, you’ll have to pay any repair or replacement expenses out of pocket. Therefore, you should also take into account your ability to afford a significant loss.

If you’re trying to decide whether or not to keep full coverage auto insurance, turn to Sun Valley Insurance for help exploring your options. They’ll evaluate your circumstances and assist you in putting together a policy customized to your unique needs. For nearly a decade, they’ve been providing residents throughout Union County, NC with quality coverage solutions at competitive rates. Call (704) 282-1155 to set up an appointment or visit them online to learn more about their services.